Drivers want compulsory third-party vehicle insurance

Tuesday, 27 March 2018

Most New Zealanders want compulsory third-party vehicle insurance - but insurers are warning it could make everyone's cover more expensive.

Research firm Canstar Blue conducted a survey that found three-quarters of the 1932 drivers spoken to thought third-party insurance, which covers the damage someone might do to another person's property, should be compulsory.

Older drivers were more certain - almost 90 per cent of Baby Boomers supported making such cover mandatory.

'Cars are often one of the most valuable items we own, both in terms of financial worth and convenience. Obviously, people want to be financially covered if they have an accident and they want to get back on the road as quickly as possible. Insurance is an enabler,' Canstar general manager Jose George said.

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His research showed the average annual car insurance bill this year was $668, $20 less than 2017. Men pay an average premium amount of $684 compared to $652 for women.

Tim Grafton, chief executive of the Insurance Council of New Zealand, said it was not as straightforward as some people believed.

'The key driver for compulsory third-party insurance elsewhere in the world is usually the need for bodily injury cover. This is less of a concern in NZ because of our ACC system.

'Australia's compulsory third-party cover is still bodily injury cover only in most states; you have to purchase the extra third-party property damage cover additional to this,' he said.

'Our position is that if motor third-party property damage was compulsory then insurers would be obligated to accept motor liability insurance risks, such as high risk/high loss drivers, that they would not normally want to insure.

'High-risk drivers should be paying larger premiums due to that risk, however those premiums could be unaffordable for many and the government may legislate price caps to assist in this. In that case, insurers would be cross-subsidising those high risk drivers with the low risk drivers.'

He said everyone would end up paying more because of that.

'If a driver did slip through the cracks and was found to be uninsured due to a breach of policy conditions, there would have to be a way of meeting any liability claims that may arise against them. A government fund would have to be established, which everyone would need to pay into, therefore increasing insurance premiums for all.'

The AA said it was not clear how effective introducing compulsory third-party insurance would be in altering driving behaviour, or how a compulsory scheme could be effectively enforced.

Insurance and Financial Services Ombudsman Karen Stevens said 10 per cent of inquiries to her scheme were from uninsured drivers who had been in accidents.

'If you own a vehicle, you should have insurance,' she said.